The money channel

PRIVATE MEDICAL Insurance (PMI) products have failed to gain much ground in terms of market share over the past few years. But all hope is not lost for brokers wanting to tap into the healthcare market. Health cashplan providers are increasingly keen to push their products through the intermediary channel and, it seems, brokers are keen to sell them.

In a car analogy, health cashplans provide cash for MOT and servicing, while PMI products provide crash repair services. In the past, brokers were keen to push PMI products, which are high value and provide big first-year commissions. And brokers regarded the small premiums paid by cashplans as not worth the effort.

Brokers are now looking at cross-selling cashplans to commercial clients, who can offer them as a benefit to bluecollar workers. Also they could appeal to the more traditional clients who might fight shy of a full PMI policy.

Damian Lenehan, Bupa's national sales manager for its key 120 intermediaries, says there is a growing take-up of health cashplans by those with PMI policies. Lenehan adds: "Policyholders see it as an enhanced medical insurance scheme."

Specialist PMI broker Stephen Walker from Brighton-based Medical Insurance Services says he will mention cashplans only as a last resort, but it can help on costs such as outpatient benefits, consultations, physiotherapy and alternative medicines.

He adds: "A cashplan will usually pay up to £100 cash lump sum for each night you spend in hospital. But it will not touch the accommodation costs in a private hospital, let alone the treatment costs."

Stress service
Another insurer helping brokers is Healthsure, whose marketing communications manager, Raman Sankaran, admits that cashplan providers had not previously been talking the broker's language. Healthsure's plan starts at £1.86 a week and includes 17 different benefits. Sankaran claims employers are impressed that their cover includes a stress helpline service.

In a recent survey, Mediquote revealed that 53% of the respondents from 114 of the known PMI intermediaries were looking to increase their cashplan business.

HSA, which claims to be the biggest player in the market, is now considering selling its products through brokers. HSA head of sales and business development David Pullen says: "We are looking at using brokers, but no final decision has been taken. However, we do deal with intermediary specialists who receive fees on a consultancy from their clients."

Westfield marketing executive Caroline Foreman says her company has set up a dedicated broker development team to sell its products. In a stroke of marketing genius, broker Heath Lambert has arranged special cover with Coventry City Council for local residents, particularly those on low incomes. The plan has three levels of cover starting at £1 a week. Other towns and cities could follow their example.

Growing demand
Insurers are now taking an interest. Groupama is to launch a cashplan later this year.

Groupama heathcare marketing head Bruce MacLellan says it will enter the market with an external partner, particularly aimed at its affinity and corporate partnership business.

Basic optical and dental treatments are areas he sees as important for cashplans. He says it is not an annual renewable business. With direct debit it "just rolls on", he says.

MacLellan says: "PMI could be broadened out into a more attractive proposition, moving from treatment to prevention, as a number of people are put off seeking basic treatment because of the cost."

Not surprisingly, direct providers and supermarket chains have jumped into this market. Boots (underwritten by Royal & SunAlliance) began selling family health, optical and dental cashplans in 1997, and other supermarket chains such as Asda, Sainsbury and Tesco have also shown interest.

But all is not rosy. Claims are rising fast. Westfield Health Scheme saw an 18% increase in claims last year with more than 560,000 claimants, and it made a record benefits payout of more than £30m in 2001.

Lack of electronic comparison data is hampering growth. Mediquote, the sole electronic quotation system for health insurance products, has only just added a second cashplan provider - Medicash - to that of BHSF, on its system. Westfield Health Scheme is planning to join in the near future.

Mike Dodd, managing director of the insurance division at Sirius Financial Systems, which includes Mediquote, says: "Insurers do not like the idea of choice - they don't want to be compared with anybody. They don't like the idea of it being price-driven, and cashplans are very price-driven."

Time management
So acute is the comparison problem, that Medical Insurance Intermediaries (MII) chairman Larry Bulmer is currently putting together his own cashplan matrix for his company, Maidstone-based Health Decisions. MII has nearly 100 general insurance broker members.

He explains: "We have to look at time management, and brokers are not able to easily give advice on cashplans that would make it equitable for them. If they had a tool that enabled them to sell cashplans easily and quickly, then I think they would. At the moment the tools are not there."

Explaining cashplan cover is also essential. Laing & Buisson economist Philip Blackburn agrees that, while there was some confusion between cashplans and PMI in the past, it is clearer now.

He says: "The Office of Fair Trading reports have encouraged transparency in benefit and actual policy wording. Consumers have the intelligence to distinguish whether it covers PMI and going to the dentist."

Bupa has acted on the confusion between cashplans and PMI. It introduced Health Additions, which avoids duplicating medical insurance cover.

People can often end up paying twice for hospital stays and consultations, and are also often covered for personal accidents under their life or household policy.

Bupa's monthly rates are £10 for a single cover, single with children £13, a couple £17 and a family £20.

The cover is for optical, dental, chiropody, hearing care, prescription charges and private GP costs.

The cashplan providers
Not-for-profit (contributory funds)